RBS Curtails Self-Rule at Queen’s Bank Coutts With Referral PlanBy
Private bank’s CEO Flavel seeks to forge closer links with RBS
Bank has target to gain 30% of new customers from RBS
Royal Bank of Scotland Group Plc is pushing to end years of quasi-independence at Coutts & Co., as the new chief of the private bank to Queen Elizabeth II seeks to extend links with its taxpayer-owned parent.
Almost a year into his tenure as chief executive officer of the U.K.’s largest private bank, Peter Flavel wants 30 percent of new clients to come from RBS. He’s already helped double internal referrals to 20 percent of new customers, Flavel said in an interview.
“There’s enormous upside and potential for Coutts to work with the commercial bank” at RBS, Flavel, 56, said at the 325-year-old lender’s London headquarters. “While our greatest opportunity is our existing client base, the next opportunity is this relationship and collaboration.”
Coutts is focusing on the U.K. market after RBS sold its international business as financial scandals in recent years underscored the risks of operating a global private bank. Switzerland’s financial regulator fined RBS 6.5 million Swiss francs ($6.5 million) earlier this month for violating money-laundering rules and illegally profiting from transactions associated with 1Malaysia Development Bhd. Flavel said the issue was handled by RBS and that he doesn’t deal with legacy issues.
A former CEO of Asia wealth management at JPMorgan Chase & Co., Flavel was brought in by RBS chief Ross McEwan in March with a mandate to pull Coutts into line after years of relative autonomy. Coutts rarely served the wealthy business owners that were already corporate clients of RBS, and former senior executives at the private bank had pushed for it to operate separately from RBS or even be sold, according to people familiar with the matter.
“Some private banks try and run themselves separately from the universal bank,” said Flavel. “The way I look at it is that, if you’re running RBS, you would definitely want Coutts to be a part of the bank. It’s the jewel in the crown.”
Coutts competes with domestic lenders offering private banking such as HSBC Holdings Plc and Barclays Plc, global firms including UBS Group AG and specialist money managers such as St. James’s Place Plc. It’s the largest firm offering full-service private banking from current accounts to loans and investments in Britain’s 1.3 trillion-pound ($1.6 trillion) wealth market.
Coutts clients typically have at least 1 million pounds of assets to invest or seek to borrow a similar amount. The bank operates a separate IT platform from RBS and its offices in central London, its home since 1904, has a pond with Japanese Koi carp in an ornate central atrium that belies RBS’s taxpayer ownership. The building, which the firm bought last year, has a special entrance reserved for the monarch.
RBS’s commercial bank, the largest in the U.K. with about 153 billion pounds of assets, could prove a rich source of potential customers, Flavel said. However, RBS is cutting back its investment bank, a business that typically helps attract customers seeking complex investments.
RBS’s private-banking division, housing Coutts and its smaller Scottish counterpart Adam & Co., increased client assets under management to 16.6 billion pounds in September, from 13.5 billion pounds a year earlier, while lending rose from 11.1 billion pounds to 11.8 billion pounds. The unit increased revenue by 2 percent to 496 million pounds in the nine months through September from a year earlier, while costs excluding litigation and restructuring charges fell by 2 percent to 365 million pounds.
Yet, the business is failing to meet profitability targets, with a cost to income ratio of 74 percent dragging on McEwan’s ambition to reduce the measure for RBS as a whole to below 50 percent. Although Flavel said he’ll maintain headcount at about 1,800 employees, he’ll cut administrative jobs as he looks to grow some parts of the business. The bank will invest more than 20 million pounds a year in digital and wealth operations for the next four years.
RBS sold its international private banking business to Switzerland’s Union Bancaire Privee two years ago in a retreat from the global wealth market. The sale included businesses in Monaco, Singapore and Hong Kong and about 32 billion Swiss francs of assets under management.